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UNITED STATES OF AMERICAFINANCIAL CRIMES ENFORCEMENT NETWORK
DEPARTMENT OF THE TREASURY
IN THE MATTER OF: ) ) ) ) Number 2021-01Capital One, National
Association )McLean, Virginia )
ASSESSMENT OF CIVIL MONEY PENALTY
The Financial Crimes Enforcement Network (FinCEN) has
determined
that grounds exist to assess a civil money penalty against
Capital One, National
Association (CONA or the Bank), pursuant to the Bank Secrecy Act
(BSA) and
regulations issued pursuant to the BSA.1
CONA has admitted to the facts set forth below and that its
conduct violated
the BSA. CONA has consented to the assessment of a civil money
penalty and
entered into a CONSENT TO THE ASSESSMENT OF CIVIL MONEY
PENALTY
(CONSENT) with FinCEN. The CONSENT is incorporated into this
ASSESSMENT
OF CIVIL MONEY PENALTY (ASSESSMENT) by reference.
JURISDICTION
At all times relevant to this ASSESSMENT, CONA was a “financial
institution”
and a “bank” within the meaning of the BSA and its implementing
regulations.2
FinCEN has the authority to impose civil money penalties on
financial institutions,
including banks, that violate the BSA.3
1. The BSA is codified at 31 U.S.C. §§ 5311-5314, 5316-5332, and
12 U.S.C. §§ 1829b, 1951-1959. Reg-ulations implementing the BSA
appear at 31 C.F.R. Chapter X.2. 31 U.S.C. § 5312(a)(2)(A); 31
C.F.R. §§ 1010.100(d)(1), 1010.100(t)(1).3. 31 U.S.C. § 5321(a); 31
C.F.R. § 1010.810(d).
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DETERMINATIONS
FinCEN has determined that CONA violated certain of its BSA
obligations
for a particular business unit, namely, its Check Cashing Group
(CCG), from in or
about 2008 through in or about 2014. As described below in the
Statement of Facts,
CONA willfully failed to establish and maintain an effective
anti-money laundering
(AML) program to guard against money laundering within the CCG.
Further, CONA
willfully4 failed to accurately and timely file suspicious
activity reports (SARs) on
suspicious transactions associated with the CCG. Last, CONA
negligently failed to
timely file currency transaction reports (CTRs) for the CCG.
CONA’s violations of
its BSA obligations resulted in the failure to accurately and
timely report millions of
dollars in suspicious transactions, including proceeds connected
to organized crime,
tax evasion, fraud, and other financial crimes laundered through
the Bank into the
U.S. financial system.
STATEMENT OF FACTS
The following facts took place beginning in or about 2008 and
continuing until
in or about 2014 (the relevant time), unless otherwise
indicated.
Background
The BSA
The BSA requires banks to implement and maintain an effective
AML program
in order to guard against money laundering.5 Additionally, the
BSA imposes
affirmative duties on banks such as CONA, including the duty to
identify and report
4. In civil enforcement of the BSA under 31 U.S.C. § 5321(a)(1),
to establish that a financial institu-tion or individual acted
willfully, the government need only show that the financial
institution or indi-vidual acted with either reckless disregard or
willful blindness. The government need not show that the entity or
individual had knowledge that the conduct violated the BSA, or that
the entity or individual otherwise acted with an improper motive or
bad purpose. CONA admits to “willfulness” only as the term is used
in civil enforcement of the BSA under 31 U.S.C. § 5321(a)(1).5. 31
U.S.C. § 5318(h); 31 C.F.R. § 1020.210; 12 C.F.R. § 21.21.
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suspicious transactions in SARs filed with FinCEN and identify
and report certain
currency transactions in CTRs filed with FinCEN.6 The reporting
and transparency
that financial institutions provide through these reports is
essential financial
intelligence that FinCEN, law enforcement, and others use to
safeguard the U.S.
financial system and combat serious threats, including money
laundering, terrorist
financing, organized crime, corruption, drug trafficking, and
massive fraud schemes
targeting the U.S. government, businesses, and individuals.7
The Financial Crimes Enforcement Network (FinCEN)
FinCEN is a bureau within the U.S. Department of the Treasury
and is the
federal authority that enforces the BSA by investigating and
imposing civil money
penalties and compliance measures on financial institutions,
nonfinancial trades
or businesses, and individuals for willful and negligent
violations of the BSA. As
delegated by the Secretary of the Treasury, FinCEN has
“[o]verall authority for
enforcement and compliance, including coordination and direction
of procedures
and activities of all other agencies exercising delegated
authority under this
chapter” and its implementing regulations, including the Office
of the Comptroller
of the Currency (OCC).8
The Office of the Comptroller of the Currency (OCC)
The OCC is a federal banking agency within the U.S. Department
of the
Treasury that has both delegated authority from FinCEN and some
autonomous
authority under Title 12 of the United States Code to examine
national banks for
compliance with the BSA. Under these authorities, it conducts
regular examinations
and issues reports assessing national banks’ BSA
compliance.9
6. 31 U.S.C. § 5313; 31 C.F.R. §§ 1010.311, 1020.320(a).7.
FinCEN, FIN-2014-A007, FinCEN Advisory to U.S. Financial
Institutions on Promoting a Culture of Compliance (Aug. 11,
2014).8. 31 C.F.R. § 1010.810(a).9. 12 U.S.C. § 1818(s)(2); 12
C.F.R. § 21.21.
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Capital One, National Association (CONA)
CONA is a wholly owned subsidiary of Capital One Financial
Corporation
(COFC), a Delaware corporation and bank holding company
headquartered in
McLean, Virginia. COFC is one of the nation’s largest banks and
takes an enterprise-
wide approach to its BSA/AML obligation. CONA provides a broad
spectrum
of banking products and financial services to consumers, small
businesses, and
commercial clients throughout the U.S. and is regulated by,
among other regulators,
the OCC. CONA is a “financial institution” and a “bank” within
the meaning of the
BSA and its implementing regulations.10
CONA’s Check Cashing Group (CCG)
In December 2006, COFC acquired North Fork Bank (NFB), including
NFB’s New
York and New Jersey check cashing customers. NFB merged into
CONA on August
1, 2007, and by 2008 CONA established the CCG as part of its
Middle Market Lending
group within its Commercial Bank. CONA operated the CCG until it
made the decision
to exit this business line in December 2013, and ultimately
exited in 2014. CONA was
responsible for ensuring that it met the BSA’s legal
requirements in banking the CCG.11
The CCG customer base included a range of between approximately
90 and
150 New York- and New Jersey-area check cashers that usually
operated storefront
locations and conducted check cashing as their primary business.
CCG customers
cashed checks by providing cash in exchange for paper checks
from individuals
(known as retail checks) and from business entities (known as
corporate checks)
and charged a fee for this service. CONA provided banking
services to the CCG
including, among other things, processing checks deposited by
CCG customers and
providing CCG customers with armored car cash shipments. CCG
customers used
10. 31 U.S.C. § 5312(a)(2)(A); 31 C.F.R. §§ 1010.100(d)(1),
1010.100(t)(1).11. The BSA separately requires check cashers (and
other money services businesses) to have their own AML programs,
file CTRs, and register with FinCEN.
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over 1,000 CONA accounts related to their check cashing
businesses, including to
deposit checks they cashed. CONA also provided CCG customers
with the currency
needed to cash checks, which was mostly delivered via armored
car shipments.
AML PROGRAM VIOLATIONS
In order to guard against money laundering, the BSA and its
implementing
regulations require each financial institution to establish an
AML program that
includes at a minimum: (a) the development of internal policies,
procedures, and
controls; (b) designation of a compliance officer; (c) an
ongoing employee training
program; and (d) an independent audit function to test
programs.12 As further
described below, CONA willfully violated the BSA’s AML Program
requirements
from in or about 2008 until in or about 2014.
Early Warnings
CONA built its Retail and Commercial Bank lines of business
primarily by
virtue of a series of acquisitions of regional banks, beginning
with the acquisition
of Hibernia Bank (Hibernia) in November 2005 and the acquisition
of NFB in
December 2006.13 Hibernia and NFB began operating under CONA’s
name in April
2006 and March 2008, respectively. Prior to CONA’s acquisitions
of and mergers
with Hibernia and NFB, federal and state bank regulators
identified deficiencies in
the AML programs at both banks, including weaknesses in
transaction monitoring,
12. 31 U.S.C. § 5318(h); 31 C.F.R. § 1020.210 (prior to July
2016 amendments).13. In April 2005, FinCEN and the federal banking
agencies issued interpretive guidance on provid-ing banking
services to MSBs such as check cashers that states, “as with any
category of accountholder, there will be [MSBs] that pose little
risk of money laundering and those that pose significant risk.”
This guidance specifically states that “banking organizations that
open and maintain accounts for [MSBs]” are expected to apply the
BSA requirements, “as they do with all accountholders, on a
risk-assessed basis.” In order to properly assess risk, the bank
should know the types of services the MSB accountholder en-gages
in, such as if the customer’s primary business is derived from
check cashing. The FinCEN guidance states, “a check casher that
cashes any type of third-party check or cashes checks for
commercial enter-prises (which generally involve larger amounts)”
presents a higher risk of money laundering. FIL-32-2005,
Interagency Interpretive Guidance on Providing Banking Services to
Money Services Businesses in the United States (Apr. 26, 2005).
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suspicious activity identification, and CTR filing. Further,
around the time of
CONA’s acquisition of NFB, the OCC notified CONA personnel of
certain AML
risks associated with banking the CCG. Then, in 2008, New York
County indicted a
CCG customer and its President and owner for various charges
directly related to its
business operations. CONA responded to these issues and risks by
implementing
certain AML controls, but these efforts, as further described
below, failed to effectively
address the illicit finance risk associated with the CCG.
Establishment of AML Program
After acquiring and incorporating NFB and Hibernia, CONA
internally
acknowledged having significant “residual AML risk attributable
to inadequate AML
internal controls.” To address the deficiencies identified by
its regulators, CONA
hired BSA/AML officers to build out an enterprise-wide AML
program befitting
CONA’s consolidated operations. Over time, these officers
produced enterprise-
wide AML policies, procedures, and process controls. However,
these controls and
procedures were inadequate to address the money laundering risk
associated with
the CCG, were inconsistently and ineffectively implemented for
CCG customers, were
plagued by a number of technical failures that were not promptly
addressed, and
gave too much credence to dubious explanations from the business
line about CCG
banking activity, all of which ultimately resulted in a failure
to guard against money
laundering and other criminal and suspicious activity.
Customer Due Diligence and Reviews
A bank’s management should have a thorough understanding of the
money
laundering risks of its customer base. Further, as part of its
AML processes, a bank
should stay apprised of changes within the industry, business
models, and customer
profiles and patterns that impact the source, nature, or purpose
of a customer’s
transactional activity; understand red flag indicators; and act
on information learned
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through the AML process. A bank should combine all of its
knowledge about its
customers’ industries, legitimate business models, individual
occupations and
activity, and money laundering indicators to assess money
laundering risks and
apply appropriate risk ratings. Those risk ratings can then aid
a bank in assessing
the appropriate basis for due diligence and ongoing transaction
monitoring for its
customers.
In mid-2008, CONA connected certain CCG customer information to
its
enterprise-wide automated AML monitoring system, which rated
customers based
on their overall risk for money laundering. CONA used a risk
scoring system based
on points it assigned for various factors. Based on the risk of
the industry and
geographic location, CCG customers automatically received a
baseline number of
points placing them in the highest risk category. One such
review conducted in 2010
identified 6,000 Bank customers at highest risk for money
laundering. Most CCG
customers ranked in the top 100 of these highest risk customers,
including C&F Inc.
(C&F), a Domenick Pucillo (Pucillo) check cashing entity
that was the highest risk
among the CCG at number 21 for the entire bank.14
CONA used the customer scores for different purposes, including
semi-annual
high-risk customer reviews, which was CONA’s greatest frequency
for regular AML
reviews. While these semi annual high-risk customer reviews did
focus on identifying
if the customer had negative news on them, assessing account
activity, comparing the
historic dollar volume to the current dollar volume to assess
the reasonableness of the
CCG customer’s transaction activity, and sampling checks within
the CCG account,
they failed to fully enable CONA to understand the nature and
legitimacy of their
customers’ activity and patterns therein.
14. If one aggregates ties, C&F’s rank increases to 18.
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Specifically, CONA developed and relied on a macro that
aggregated debits
and credits for the CCG customer under review and then compared
the macro
information with a sample of historic transactional dollar
volume to determine
if the customer’s activity was “consistent” or if it had a
statistically significant
deviation in transaction volume. As long as the activity
appeared to be related to
the business model—such as a check casher depositing checks—or
had a ready
explanation for deviations outside the “consistent” volume
marker, the activity
was deemed “reasonable” and the initial high-risk alert was
closed without further
action. Although CCG accounts were reviewed again after initial
reviews, often
these further reviews were perfunctory, relying too heavily on
the results of the
macros and comparisons to past activity, without taking
additional investigative
steps or incorporating additional knowledge about the customers.
As a consequence,
CONA failed to detect red flags or follow up appropriately on
potential indications
of suspicious activity. In other words, CONA improperly used
consistency as the
primary benchmark for reasonableness, overlooking the nature or
apparent lawful
purpose of their customer’s underlying activity and the patterns
therein.
The CCG’s Large Item Report (LIR)
In 2010, CONA developed an additional specialized tool and
process unique
to the CCG business unit which came to be known as the Large
Item Report (LIR).
The LIR was a CCG specific data filtering exercise designed to
provide insight into
larger checks (>$9,000) cashed by CONA’s CCG customer’s
customers (the check
casher’s patrons) to assist CONA’s AML analysts with the
identification of potentially
suspicious activity. However, CONA’s implementation of the LIR
was deficient.
In December 2010, CONA made a change to the way its
transactional data
streams were coded for all customers, which caused checks cashed
at several CCG
customers, including Dependable Check Cashing Corporation
(Dependable) and all
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of Pucillo’s check cashing businesses (despite his status as the
highest risk customer
in the CCG and among the highest-risk customers at CONA overall)
to not appear on
the LIR until 2013. Then in August 2012, CONA made a
generally-applicable coding
change, which caused all of the remaining CCG customer data
streams to disappear
from the LIR. Although AML analysts flagged this problem for
technical support in
September 2012 upon identifying the issue, the LIR was not
repaired until July 2013,
at which point CONA voluntarily commenced a lookback of the
transactions that fit
the criteria for LIR review when the LIR had not been
operational. As a result, from
August 2012 until July 2013, the LIR was wholly inoperative.
AML Compliance Determinations
CONA’s process for investigating suspicious transactions for the
CCG was
weak, and resulted in the failure to fully investigate and
report suspicious conduct.
For example, from at least January 2009 through December 2013,
AML analysts
repeatedly identified suspicious activity—variously described as
“a medical fraud
ring,” “excessive corporate check cashing,” “high dollar
checks,” and “structured
third-party checks”— within at least 30 CCG customers’ accounts.
However, as part
of its ordinary AML process, AML management routinely instructed
analysts to
contact CONA’s relationship manager for the CCG business line to
obtain additional
information and guidance regarding CCG related transactions. In
turn, the business
line often suggested vague and implausible explanations for the
CCG activity, such
as: “CTRs filed as necessary,” “making payroll,” “hurricane
Sandy work,” “known
to customer,” “a high number of customers in February because of
tax refunds being
cashed at the stores,” “Uptick in Corporate Check Cashing,”
“Fewer days in the
month,” and “Aggressively looking to manage down excess
currency.” At times,
CONA’s AML analysts accepted such justifications from the CCG
business line at face
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value, which limited their ability to perform effective AML
scrutiny and file robust
SARs. As a consequence, CONA failed to fully investigate much of
this activity, or
report it to FinCEN as suspicious.
Unfiled SARs and CTRs
In addition to the above AML program failures, the AML failures
that resulted
in the below willful failures to timely and accurately file SARs
and the negligent
failure to file CTRs, and the failure by CONA to timely identify
such failures, also
establish the AML program violations.
SAR FILING VIOLATIONS
Background
The BSA and its implementing regulations require banks to report
transactions
that involve or aggregate to at least $5,000, are conducted by,
at, or through the bank,
and that the bank “knows, suspects, or has reason to suspect”15
are suspicious. A
transaction is “suspicious” if it: (a) involves funds derived
from illegal activities,
or is conducted to disguise funds derived from illegal
activities; (b) is designed
to evade the reporting or recordkeeping requirements of the BSA
or regulations
under the Act; or (c) has no business or apparent lawful purpose
or is not the sort
in which the customer normally would be expected to engage, and
the bank knows
of no reasonable explanation for the transaction after examining
the available facts,
including background and possible purpose of the transaction.16
A bank is generally
required to file a SAR no later than 30 calendar days after the
initial detection by the
bank of the facts that may constitute a basis for filing a
SAR.17
15. 31 U.S.C. § 5318(g); 31 C.F.R. § 1020.320.16. 31 C.F.R. §
1020.320(a)(2)(i)-(iii).17. 31 C.F.R. § 1020.320(b)(3).
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FinCEN, law enforcement, and other regulators rely on financial
institutions’
accurate and timely filing of SARs. To accurately report a SAR,
parties involved in
the suspicious activity being reported on should be identified
as a subject of the SAR.
Investigators use names and other identifiers to retrieve
relevant records related to
the subjects and targets of an investigation. Failure to file
BSA reports hampers an
investigator’s ability to identify relevant records.
Additionally, filing SARs without
properly identifying the subjects (i.e., mischaracterizing
customers as victims) can
obfuscate the true nature of the activity and those
involved.
As a consequence of its AML program failures, CONA failed to
accurately
and timely file SARs on its CCG customers. Indeed, CONA filed no
SARs on its
CCG customer activity until October 2009, and thereafter CONA
often failed to
detect and report suspicious activity by the check cashers
themselves, even as it
detected and reported activity by the check casher’s customers.
Last, and as further
described below, during the relevant period CONA failed to file
SARs even when
it had direct knowledge of certain CCG customers’ indictments
and guilty pleas for
criminal activity associated with their check cashing operations
flowing through the
Bank’s accounts.
Domenick Pucillo: Genovese Organized Crime Family
Domenick Pucillo was one of the largest check cashers in the New
York-New
Jersey area. At times, he owned or controlled at least six check
cashing entities, all of
which were CCG customers. These entities combined made Pucillo
the fourth largest
CCG customer. In May 2019, Pucillo pleaded guilty to conspiring
to commit money
laundering in connection to loan sharking and illegal gambling
proceeds that flowed
through his CONA accounts as an associate of the Genovese
organized crime family.
Summarized below are examples of Pucillo’s check cashing
activity that CONA failed
to accurately and timely report in SARs filed with FinCEN.
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New Jersey Money Laundering
In March 2010, an AML analyst identified 30 “checks of interest”
for C&F.
The “checks of interest” were corporate checks and all dated in
October 2009. They
had a total value of over $1 million and appeared, based on the
payee names, to
be related to the construction industry. The checks ranged in
value from $2,500 to
$475,000. Six checks were each for round dollar amounts of
$10,000 and one check
was for exactly $100,000. On the back of two checks was an
endorsement stamp
containing an individual’s name and the name of a company, as
well as the CONA
account number into which the checks were to be deposited.
Seventeen of the
checks were payable to the same payee from 10 different payors
with a total value
of $217,205. Of these, four checks were from the same payor, had
the same date,
were all for $10,000, and were sequentially numbered. These
transactions displayed
clear red flags of illicit activity. The AML analyst raised
these issues, but ultimately
CONA failed to file a SAR on this conduct.
As CONA developed the LIR, it generated a report showing all
checks cashed
valued at over $9,000 during August and September 2010 for
internal use. This report
showed that Pucillo entities cashed over $14 million in checks
of this size in just two
months—the highest of all CCG customers. Despite this status and
his status as
among the highest-risk customers for money laundering at CONA,
Pucillo entities did
not appear on the LIR following the initial 2010 report until
July 2013, when all CCG
customers’ transaction data streams were added to the report
code.
Pucillo’s Law Enforcement Activity
CONA was repeatedly made aware of Pucillo’s connection to and
participation
in criminal activity, yet CONA failed to timely file SARs on any
suspicious conduct
by Pucillo. For example, in January 2012, Pucillo purchased a
Florida check cashing
business and opened CONA accounts for it. By March 2012, CONA
received notice
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that a Miami armored car company it used had received a court
order to freeze
Pucillo’s CCG accounts relating to this business. In July 2012,
CONA placed a
temporary hold on Pucillo’s account after the Florida’s Workers
Compensation Fraud
task force seized approximately $1 million from the entity’s
CONA deposit accounts.
Then, on January 8, 2013, AML analysts learned that Pucillo was
facing
potential charges for money laundering in New Jersey, and
notified AML
management. In March 2013, AML analysts also learned, and
notified AML
management, that Pucillo had been arrested in February on
separate charges arising
out of Florida for his role as one of the ringleaders in a
large-scale check cashing
scheme to evade the cost of workers’ compensation coverage,
related to the above
seizure by the Florida’s Workers Compensation Fraud task force.
Although the
Florida actions against Pucillo were later dropped, the New
Jersey proceedings
continued. Despite this information, from this point until
December 13, 2013, CONA
allowed Pucillo’s entities to conduct over 20,000 transactions
valued at approximately
$160 million through 23 CONA deposit accounts, including cash
withdrawals. During
this approximate one-year window, CONA failed to formally
identify or report any
suspicious activity naming Pucillo or his entities.
Unregistered MSB Transactions
From 2008 through 2012, Pucillo used one of his CONA accounts to
deposit
checks received through an unregistered check bundler—an account
not connected
to the LIR. Transactions through this account displayed red
flags of suspicious
activity. The largest check was for $475,000—and the payee
subsequently pleaded
guilty to state tax evasion charges. In addition, Pucillo was
both the check payor and
payee for 58 checks valued at $6.9 million deposited through
this account. Of these,
26 checks were for amounts of $100,000 or more with the highest
check for $618,000.
This practice of writing a check to himself is unusual given
that Pucillo routinely
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transferred funds between his entities’ accounts, and using this
method would incur
additional fees from CONA. This activity is a red flag and can
indicate check kiting
and other suspicious activity. CONA did not timely file SARs on
this activity.
Pucillo AML Monitoring
During 2011 through 2013, the Bank’s enterprise-wide AML
monitoring system
generated 75 alerts related to just three Pucillo check cashing
entities, which were
reviewed by AML staff. Additionally, nine semi-annual and annual
high-risk reviews
were conducted for these three customers in this time period;
the most recent review
for each customer deemed account activity to be “reasonable.” A
total of 17 alerts
related to law enforcement activity were triggered, but CONA
concluded that all of
this activity was reasonable. Fifty nine of the 75 alerts
resulted in SAR filings, but
none named Pucillo as a subject. Fifty-three of the 59 SAR
filings involved returned
check items that identified Pucillo as a victim (not a subject),
and six related to a
voluntary look-back after his data was first connected to the
LIR in August 2013. On
December 12, 2013, CONA filed a SAR naming Pucillo as a subject
of activity flowing
through his accounts—the first time since Pucillo became a CONA
customer in 2007.
Goldberg Group: Criminal Charges
CONA was also made aware of criminal charges against other CCG
customers.
In July 2009, CONA became aware of a 186-count indictment filed
against the
Goldberg Group of check cashers (Veil Check Cashing Corp; Vale
Checking of New
York, Inc.; Tompkins Express Check Cashing Corp.; and GEM Check
Cashing Corp.,
each of which was a CONA CCG customer) and their principal
owner, Charles
Goldberg. The indictment specifically alleged that from October
2006 to July 2008,
the Goldberg Group falsified business records, concealed
structured transactions,
and either falsified or failed to file CTRs. The indictment
further alleged that during
this two-year period, a check bundler cashed approximately $40
million in checks
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from 389 construction-related companies through the Goldberg
Group. On or about
July 29, 2009, Charles Goldberg met in-person with CONA
managers, admitted his
involvement in the criminal activity charged in the indictment,
and informed them
that he had entered into a plea agreement with the government.
Further, in December
of 2009, law enforcement activity triggered an AML review on a
Goldberg entity.
This review was closed in January 2010 without filing a SAR with
the justification
of “activity appears reasonable for a check casher.” While CONA
did take some
remedial measures with respect to the ongoing operations of the
Goldberg Group,
CONA did not file a SAR on the Goldberg Group’s criminal
activity detailed in the
indictment until eight years after the conduct, in March
2017.
Dependable: Criminal Charges
Dependable was a Brooklyn, New York-based check casher and CONA
CCG
customer. In August 2012, CONA managers learned that a manager
at Dependable had
been indicted in the United States District Court for the
Southern District of New York,
along with two other individuals, on charges relating to
Dependable’s business that
included conspiracies to commit money laundering, evade CTR
reporting requirements,
and engage in unlicensed money transmitting. The indictment
covered activity from
2008 to 2012 and described a Dependable manager permitting
individuals who acted as
check bundlers to cash third-party checks made out to shell
companies. The indictment
also stated that the manager provided check brokers with the
names of shell companies
to use as payees on checks, then charged the check brokers a
fee—at times greater than
2%—to cash the third-party checks. The Dependable manager
instructed and permitted
check brokers to structure currency transactions. The three
co-defendants each pleaded
guilty in the spring of 2013. While CONA did undertake some
remedial measures
with respect to the ongoing operations of Dependable, CONA did
not file any SARs on
Dependable or its owners until July 2014.
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CTR FILING VIOLATIONS
The BSA and its implementing regulations impose an obligation on
financial
institutions to file a report of each deposit, withdrawal,
exchange of currency, other
payment or transfer, by, through, or to such financial
institution, which involve
a transaction in currency of more than $10,000, including
multiple transactions
that aggregate to more than $10,000.18 A bank must file a CTR
within 15 days
after the transaction is conducted.19 FinCEN has repeatedly and
publicly affirmed
that accurate, complete, and timely CTRs are critical to the
utility of BSA data in
combating financial crimes, terrorist financing and other
illicit activity.
Between in or about January 2006 and March 2008, during the
course of
the acquisition of NFB and Hibernia and their integration into
CONA, CONA
experienced several errors with their CTR reporting system.
FinCEN issued a
warning letter and admonished CONA to accurately and timely file
its CTRs and
noted in its formal communications that the bank’s compliance
history could be
considered by FinCEN in the future. CONA was thereafter
negligent in ensuring
that it filed all CTRs related to the CCG. Specifically, CONA
utilized an internal
system that assigned a “cash” code for customer withdrawals to
effectuate CTR
filings. In designing its system, CONA failed to assign this
“cash” code to armored
car cash shipments for a number of customers using a specific
accounting method
for armored car shipments, including the CCG. Accordingly, these
transactions were
not identified as customer cash withdrawals and therefore not
reported to FinCEN
through CONA’s CTR reporting systems.
18. 31 U.S.C. § 5313; 31 C.F.R. § 1010.311. 19. 31 C.F.R. § at
1010.306(a).
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The failure to properly code these cash shipments resulted in
approximately
50,000 reportable cash transactions totaling over $16 billion in
cash to the CCG over
the course of over three years to go unreported to FinCEN. While
business managers
received near-daily reports on armored car cash shipments, and
CONA timely
reported CTRs on armored car cash shipments to other locations,
such as ATMs,
CONA failed to timely report CTRs for CCG armored car cash
shipments. Although
CONA self-reported and remediated this issue, this failure was
negligent and
exhibited a pattern of negligence with respect to CONA’s legal
obligation to file CTRs.
VIOLATIONS
FinCEN has determined, and CONA admits, the above facts
constitute
violations of the BSA, specifically:
(1) from at least in or about 2009 through in or about 2014,
CONA willfully
failed to implement and maintain an effective AML program to
guard
against money laundering through the CCG, in violation of 31
U.S.C. §§
5318(a)(2) and 5318(h)(1) and 31 C.F.R. § 1020.210;
(2) CONA willfully failed to accurately and timely report
suspicious
transactions relating to the CCG, in violation of 31 U.S.C. §
5318(g); and
(3) CONA negligently failed to timely report transactions
involving
currency in amounts greater than $10,000, in violation of 31
U.S.C. § 5313
and 31 C.F.R. §§ 1010.306(a)(1) and 1010.310.
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CIVIL MONEY PENALTY
I. Legal Background
Under the BSA, FinCEN may impose a civil money penalty of
$25,000 against
CONA for each willful violation of the AML program
requirement.20 The BSA
provides that a “separate violation” of the AML program
requirement occurs “for
each day that the violation continues.”21 Violations of AML
program requirements
include the lack of one or more AML program “pillars.”
Furthermore, a civil money penalty not to exceed the greater of
the amount
involved in each transaction (but capped at $100,000) or $25,000
may be imposed for
each willful violation of the SAR-filing requirement.22 Finally,
a civil money penalty
not to exceed $500 may be imposed for each negligent violation
of the CTR-filing
requirement, and an additional $50,000 civil money penalty for a
“pattern of negligent
activity.”23
II. Cooperation and Remediation
FinCEN may consider, among other things, a financial
institution’s cooperation
and remediation in determining whether to assess a civil money
penalty at the
maximum amount, or whether to impose a lower penalty. CONA’s
extensive
remediation and cooperation formed a significant part of
FinCEN’s assessment of the
penalty in this matter. In particular, FinCEN considered
remedial steps taken during
20. 31 U.S.C. § 5321(a)(1). This amount has been adjusted from
$25,000 to $58,328 pursuant to the Federal Civil Penalties
Inflation Adjustment Act of 1990 and 31 C.F.R. § 1010.821, although
due to the timing of the violations at issue FinCEN computed the
civil money penalty using the lower number.21. 31 U.S.C. §
5321(a)(1).22. 31 U.S.C. § 5321(a)(1); 31 C.F.R. § 1010.820(f).
These amounts have been adjusted from $25,000 and $100,000 to
$58,328 and $233,313, respectively, pursuant to the Federal Civil
Penalties Inflation Ad-justment Act of 1990 and 31 C.F.R. §
1010.821, although due to the timing of the violations at issue
Fin-CEN computed the civil money penalty using the lower
numbers.23. 31 U.S.C. § 5321(a)(6); 31 C.F.R. § 1010.820(h). This
amount has been adjusted from $500 to $1,166 pursuant to the
Federal Civil Penalties Inflation Adjustment Act of 1990 and 31
C.F.R. § 1010.821, although due to the timing of the violations at
issue FinCEN computed the civil money penalty using the lower
number.
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– 19 –
the course of the conduct described above, including, but not
limited to: in 2011, self-
reporting and backfiling over 50,000 unfiled CTRs; in 2013
voluntarily commencing a
lookback on transactions not captured on the LIR; and its
decision to voluntarily exit
the check cashing business beginning in December 2013 and
completed by December
2014. Moreover, CONA has invested considerably in integrating
and enhancing its
AML program over the past several years under new AML
leadership, including
more than tripling its AML budget and staff since 2014. Last,
CONA provided
FinCEN with voluminous documents, made several presentations of
its findings to
FinCEN, and signed several agreements tolling the statutes of
limitations during this
investigation.
III. OCC Penalty
In July 2015, CONA entered into an AML consent order with the
OCC (OCC
Order) for related conduct at issue in this matter. In October
2018, CONA made a
$100 million payment to the OCC pursuant to the OCC Order.
IV. Civil Money Penalty Determination
FinCEN has determined that CONA violated the AML program and
reporting requirements of the BSA and its implementing
regulations as described
in the CONSENT, and that grounds exist to assess a civil money
penalty for these
violations.24 FinCEN has determined that the penalty in this
matter will be $390
million. FinCEN has agreed to credit the payment of $100 million
CONA made in
relation to the OCC Order. Accordingly, FinCEN’s penalty will be
deemed satisfied
by an immediate payment of $290 million to the U.S. Department
of the Treasury.
24. 31 U.S.C. § 5321; 31 C.F.R. § 1010.820.
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– 20 –
CONSENT TO ASSESSMENT
To resolve this matter, and only for that purpose, CONA has
consented to this
ASSESSMENT of a civil money penalty in the sum of $390 million,
which penalty will
be satisfied by a payment of $290 million to the U.S. Department
of the Treasury.
CONA has admitted to the Statement of Facts set forth in the
CONSENT,
which mirrors the Statement of Facts in this Assessment;
admitted that the Bank
violated the BSA; and admitted that the conduct of the Bank
establishes “willfulness,”
as the term is used in 31 U.S.C. § 5321(a)(1), with respect to
the AML Program and
Failure to Timely and Accurately File SARs violations, and the
conduct of the Bank
establishes “negligence,” as the term is used in 31 U.S.C. §
5321(a)(6), with respect to
the Failure to Timely File CTR violations. CONA has understood
and agreed that in
any administrative or judicial proceeding that FinCEN may bring
against it, including
any proceeding in which FinCEN seeks civil money penalties or
equitable remedies,
CONA will be precluded from disputing the facts set forth in the
Statement of Facts
and any other determination in the CONSENT.
CONA has recognized and stated that it entered into the CONSENT
freely and
voluntarily and that no offers, promises, or inducements of any
nature whatsoever
were made by FinCEN or any employee, agent, or representative of
FinCEN to induce
CONA to enter into the CONSENT, except for those specified in
the CONSENT.
CONA has understood and agreed that the CONSENT embodies the
entire
agreement between CONA and FinCEN, and its terms relate only to
this enforcement
matter alone and the facts and determinations contained therein.
CONA has further
understood and agreed that there are no express or implied
promises, representations,
or agreements between CONA and FinCEN other than those expressly
set forth or
referred to in the CONSENT and that nothing in the CONSENT or in
the ASSESSMENT
is binding on any other agency of government, whether Federal,
State or local.
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PUBLIC STATEMENTS
CONA has agreed that it shall not, nor shall its attorneys,
agents, partners,
directors, officers, employees, affiliates, or any other person
authorized to speak on its
behalf, make any public statement contradicting either its
acceptance of responsibility
set forth in the CONSENT or any fact in the Statement of Facts
section of the
CONSENT. If a contradictory statement is made, CONA may avoid a
breach of the
CONSENT by repudiating such statement, in writing, within 48
hours of notification
by FinCEN. The foregoing restrictions do not apply to any
statement made by an
agent of CONA in the course of any criminal, regulatory, or
civil case initiated against
such person, unless CONA later ratifies such claims, directly or
indirectly. CONA has
agreed that, upon notification by FinCEN, CONA will repudiate in
writing statements
made in such proceedings that are not ratified by CONA, to the
extent the statements
contradict either the acceptance of responsibility in the
CONSENT or any fact set forth
in the Statement of Facts of the CONSENT. FinCEN has sole
discretion to determine
whether any statement made by CONA, or by any agent of CONA or
any other
person authorized to speak on behalf of CONA, is contradictory,
and whether CONA
has in fact repudiated such statement.
RELEASE
Execution of the CONSENT, upon it being effective, and
compliance with all of
the terms of the CONSENT, settles all claims that FinCEN may
have against CONA
for the conduct described in the Statement of Facts of the
CONSENT. Execution of the
CONSENT, and compliance with the terms of the ASSESSMENT and the
CONSENT,
does not release any claim that FinCEN may have for conduct by
CONA other than
the conduct described in the Statement of Facts of the CONSENT,
or any claim that
FinCEN may have against any current or former director, officer,
owner, or employee
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of CONA, or any party other than those named in the CONSENT.
Upon request,
CONA shall truthfully disclose to FinCEN all factual information
not protected by a
valid claim of attorney-client privilege or work product
doctrine with respect to the
conduct of its current or former directors, officers, employees,
agents, or others.
CONA has expressly agreed to waive any statute of limitations or
other defense
based on the passage of time that may apply to an action based
on the conduct
described in the Statement of Facts of the CONSENT, except as to
claims already time
barred as of the date of entry of the CONSENT, and further
agrees not to contest any
finding set forth in the Statement of Facts of the CONSENT or
any other admission in
the CONSENT.
By:
/S/ January 15, 2021
Kenneth A. Blanco Date: Director Financial Crimes Enforcement
Network
UntitledASSESSMENT OF CIVIL MONEY
PENALTYJURISDICTIONDETERMINATIONSSTATEMENT OF FACTSBackgroundAML
PROGRAM VIOLATIONS SAR FILING VIOLATIONSCTR FILING
VIOLATIONSVIOLATIONS
CIVIL MONEY PENALTYI. Legal BackgroundII. Cooperation and
RemediationIII. OCC PenaltyIV. Civil Money Penalty
Determination
CONSENT TO ASSESSMENTPUBLIC STATEMENTSRELEASE